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[PODCAST] EU Open Rundown 16th July 2018

  • Asian stocks began the week subdued. Chinese GDP beat on a Q/Q basis, in-line Y/Y, retail sales a beat, industrial production a miss
  • UK Eurosceptics have set up a “party within a party” with a highly organised whipping operation among Tory Eurosceptic MPs. Justine Greening calls for a second referendum
  • Looking ahead, highlights include, US retail sales, NY Fed mfg, US President Trump meets with Russian President Putin

ASIA

Asian stocks began the week subdued with the region lacklustre amid the absence of Japanese participants and following a quiet weekend in terms of newsflow, while the region also digested a deluge of mixed Chinese data including a slowdown in Q2 GDP. ASX 200 (-0.5%) was on the backfoot from early trade amid cautiousness prior to the key Chinese releases and with the index dragged by losses in miners and financials. Elsewhere, Shanghai Comp. (-0.5%) and Hang Seng (-0.1%) were downbeat after the mixed data in which GDP topped estimates on a Q/Q basis at 1.8% vs. Exp. 1.6%, but GDP Y/Y slowed inline with forecasts to 6.7% vs. Prev. 6.8%. In addition, Retail Sales was better than expected and Industrial Production disappointed, while the lending and money supply data late last week was also varied and added to the uninspired tone. In terms of today’s notable movers, ZTE shares surged after the US confirmed to lift the ban on US sales to the Co. while Xiaomi were on the other side of the spectrum after the Shanghai Stock Exchange banned investors from trading in a dozen of foreign companies and firms with weighted-voting rights via the stock-connect.

Chinese Premier Li reiterated China and EU are to uphold multilateralism and free trade during meeting with EU officials, while EU's Tusk said trade wars can result to hot wars and that EU is seeking support for WTO reform. (Newswires)


Chinese investors are to be banned from trading in shares of a dozen foreign firms and firms with weighted voting rights, as China aims to protect retail investors using HK link from less understood securities. (Newswires)

PBoC injected CNY 170bln via 7-day and CNY 130bln via 14-day reverse repos for a net CNY 300bln daily injection. (Newswires)
PBoC set CNY mid-point at 6.6758 (Prev. 6.6727)

Chinese GDP (Q2) Q/Q 1.8% vs. Exp. 1.6% (Prev. 1.4%). (Newswires)
Chinese GDP (Q2) Y/Y 6.7% vs. Exp. 6.7% (Prev. 6.8%)
Chinese GDP YTD (Q2) Y/Y 6.8% vs. Exp. 6.7% (Prev. 6.8%)

Chinese Industrial Output (Jun) Y/Y 6.0% vs. Exp. 6.5% (Prev. 6.8%)

Chinese Retail Sales (Jun) Y/Y 9.0% vs. Exp. 8.8% (Prev. 8.5%)

UK

Eurosceptics have set up a “party within a party” with a highly organised whipping operation among Tory Eurosceptic MPs to try to frustrate Theresa May’s Brexit plans. (Telegraph)

UK PM May’s chances of winning support for her Brexit compromise have been dealt a huge blow as Justine Greening has become the first senior Conservative to support calls for a second referendum. (Times)

UK PM May has been dealt a further blow after Robert Courts, who replaced David Cameron as Tory MP for Witney, has quit as a ministerial aide at the Foreign Office to oppose the Chequers proposals. (Times)

Brexit Secretary Raab is stepping up preparations for a “no deal” Brexit and expanding the government unit that is preparing for the possibility of Britain crashing out of the EU. (FT)

Conservative Tory chairman Lewis has been accused of threatening to cut funding from Brexiteer opponents of Chequers deal. (Telegraph)

UK Rightmove House Prices (Jul) M/M 0.1% (Prev. 0.4%). (Newswires)
UK Rightmove House Prices (Jul) Y/Y 1.4% (Prev. 1.7%)
UK Visa Consumer Spending in June rose by 0.7% Y/Y (Prev. 0.9%); first consecutive increase in over a year.


EU

US President Trump stated that he thinks the EU are a foe regarding what it does to the US on trade, while Trump also stated that China is a foe economically and that Russia is a foe in certain respects. (Newswires)
 

ECB’s Weidmann warned the German cabinet to be prepared for tougher times ahead during a meeting earlier this month and stated that the ECB has little scope to act in a slowdown due to policy normalisation. (Handelsblatt)

Fitch affirmed Spain at 'A-'; Outlook Stable and downgraded Turkey from BB+ to BB; outlook negative. (Fitch Ratings)
 

FX

FX markets were quiet overnight in which most majors remained near Friday’s close and the DXY consolidated after it failed to hold on to the 95.00 level last week. This kept EUR/USD and GBP/USD sideways at the 1.1600 and 1.3200 handles respectively to provide some early respite from last week’s tumultuous price swings. Elsewhere, JPY-crosses were also indecisive amid the absence of Japanese participants, while commodity linked currencies saw a minimal pullback overnight after the somewhat inconclusive Chinese data.
 

COMMODITIES

Commodities traded flat overnight with WTI crude futures heading into European trade lower 0.6% and back below the USD 71.00/bbl level with the downtick the result of a pullback from last Friday’s settlement amid reports that the Trump administration was said to be considering tapping into the Strategic Petroleum Reserve to rein in prices. Elsewhere, gold was little changed with minimal gains seen following last Friday’s pull back in the USD, while copper also traded sideways as demand was restricted by a lacklustre tone in the region and mixed Chinese data.

US Baker Hughes Total Rig Count (13 Jul) 1054 (Prev. 1052). (Newswires)

Trump Administration was reported on Friday to be considering tapping the US emergency oil reserve (SPR), with the size said to be between a 5mln barrel test up to 30mln barrels. (Newswires)

Norwegian oil and gas strike escalated in which with the union added a further 900 workers after the deadline passed with no agreement reached. (Newswires)

US rejected calls from the EU to grant exemptions to European companies from Iran sanctions. (Newswires)


US

Treasuries held in positive ground on Friday amid decent volume on the buy side heading into the weekend and supported by marginal flow factors coming from Europe and Japan. Most of the action was concentrated in the belly of the curve where yields were lower by c.2bps. Spread were mixed as 2s5s and 2s10s narrowed by c.1bps whilst 5s30s widened by c.1bps. US 10YR T-notes futures (U8) settled 6+ ticks higher at 120.11+.

US President Trump stated over the weekend that he fully intends to run for re-election in 2020. (Newswires)

Fed's Kaplan (Non-Voter, Neutral) said intensifications of trade tariffs would see downgrades to 2018 and 2019 growth forecasts, while he also said that he expects one more hike in 2018 and could be convinced of a fourth hike depending on outlook. (Newswires)

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MOC: * SPX 850mln to sell (vs at 650mln to sell at 1549 EDT) * Dow 50mln to sell (vs 100mln to buy at 1549 EDT)